What is implied volatility?
At its most basic level, volatility is a statistical measure of the propensity of an option, stock, index, or other financial investment vehicle to fluctuate either up or down over a given time period. Implied volatility, as it applies to options, therefore, is the estimated volatility of the underlying security’s price, and helps determine the price of the option. In essence, implied volatilities are driven by market expectations of the underlying stock. For AMAG, IV has swelled to reflect expectations for a large move in the shares. According to the Schaeffer’s Volatility Index vs Historical Volatility Filter, the stock’s current Schaeffer’s Volatility Index (SVI) arrives at 79.50% and is considerably higher than its HV of 32.50%. This means that traders are pricing the potential for a sharp move in the underlying shares into the equity’s options. As such, AMAG’s options are considerably more expensive at the moment, increasing the cost of buying contracts, but also increasing the po
